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VARI-L COMPANY, INC.
795,000 Shares
Common Stock
$0.01 Par Value
This Prospectus relates to the offer and sale of 795,000 shares of
common stock, par value $0.01 per share (the "Shares") of Vari-L Company,
Inc. (the "Company") by certain warrant holders and shareholders of the
Company (the "Selling Shareholders"). The Shares may be sold from time to
time by the Selling Shareholders, through ordinary brokerage transactions
in negotiated transactions or otherwise, at fixed prices which may be
changed, at market prices prevailing at the time of sale or at negotiated
prices. See - "Selling Shareholders" and "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares. The Company has agreed to bear certain expenses in connection
with the registration of the Shares being offered and sold by the Selling
Shareholders.
The Company's Common Stock, $0.01 par value per share (the "Common
Stock") is traded on The Nasdaq Stock Market -- National Market System
under the symbol "VARL." On October 6, 1997, the last reported sale price
of the Company's Common Stock was $11.125.
THESE ARE SPECULATIVE SECURITIES.
SUCH SECURITIES INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" AT PAGE 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
No person has been authorized to give any information or to make any
representation other than those contained in the Prospectus in connection
with the offering made hereby, and if given or made, such information or
representation must not be relied upon as having been authorized by the
Company or by the Selling Shareholders. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information herein is correct as of any
time subsequent to the date hereof.
--------------------------
The date of this Prospectus is October 7, 1997.
AVAILABLE INFORMATION
Vari-L Company, Inc. (the "Company") has filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement on
Form S-3 (the "Registration Statement" ) under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the Common Stock
offered hereby. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules thereto or
incorporated by reference therein. Such information, including exhibits
and schedules to the Registration Statement incorporated by reference
therein, can be inspected and copied at the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C 20549. Statements
made in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and, in each instance,
reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information
with the Commission. All such information may be inspected and copied at
the public reference facilities maintained by the Commission at its
principal office at 450 Fifth Street, N.W., Room 1024, Judiciary Plaza,
Washington, D.C. 20549, and at the following regional offices of the
Commission: 1801 California Street, Suite 4800, Denver, Colorado 80202-
2648; Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material can also be obtained from
the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a site on the World Wide Web at
http://www.sec.gov/edgarhp.htm that contains reports, proxy and
information statements and other information concerning registrants that
file electronically with the Commission. The Common Stock is traded on
the National Association of Securities Dealers, Inc., Automated Quotation
System ("Nasdaq"). Information filed by the Company with Nasdaq may be
inspected at the offices of Nasdaq at 1735 K Street, N.W., Washington,
D.C. 20006.
This Prospectus incorporates by reference documents which are not
presented herein or delivered herewith. Copies of these documents (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference) are available to any person, including any
beneficial owner, to whom this Prospectus is delivered, on written or oral
request, without charge, directed to David G. Sherman, President, Vari-L
Company, Inc., 11101 East 51st Avenue, Denver, Colorado 80239, telephone
number 303/371-1560.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference
(Commission File No. 0-23866):
1. Annual Report on Form 10-KSB for the year ended December 31,
1996, filed March 31, 1997;
2. Quarterly Reports on Form 10-QSB for the quarter ended March 31,
1997, filed May 15, 1997 and for the quarter ended June 30, 1997, filed
August 13, 1997.
3. Form 8-A (Commission File No. 0-23866) filed April 20, 1994;
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the termination of the offering
shall be deemed to be incorporated by reference herein and to be a part
hereof from the date of filing of such reports and documents. Any
statement contained in a document incorporated or deemed to be
incorporated by reference herein prior to the date hereof shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference
herein, modifies or supersedes such statement. Any statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
A copy of the documents incorporated by reference other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference in the information contained in this Prospectus), may be
obtained upon request without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered
upon the written or oral request of such person. Requests for such copies
should be made to David G. Sherman, President, Vari-L Company, Inc., 11101
East 51st Avenue, Denver, Colorado 80239, telephone number 303/371-1560.
In addition, such materials filed electronically by the Company with the
Commission are available at the Commission's World Wide Web site at
http://www.sec.gov/edgarhp.htm.
THE COMPANY
Vari-L Company, Inc. (the "Company") designs, manufactures and
markets a wide range of signal processing components and devices which are
used in communications equipment and systems, such as cellular telephones
and base stations, local area computer networks, and satellite
communications equipment, as well as military and aerospace applications,
such as advanced radar systems, missile guidance systems, and navigational
systems. The Company sells its products primarily to original equipment
manufacturers of communications systems.
The Company was founded in 1953 in Stamford, Connecticut, relocated
to Denver, Colorado in 1969, and reincorporated under Colorado law in
1985. The Company's manufacturing and corporate facilities are located at
11101 East 51st Avenue, Denver, Colorado 80239, and its telephone number
is 303/371-1560.
The Company's products are used in wireless communications equipment.
Wireless communication is the transmission of voice and data signals
through the air, without a physical connection, such as a metal wire or
fiber-optic cable. Wireless communications systems currently in use
include cellular telephones and base stations, wireless cable (LMDS),
satellite communications, global positioning systems, local area networks,
as well as radar systems, missile guidance systems and navigational
systems. Communications systems currently in the development stage
include personal communications systems and direct broadcast satellites.
The Company's products are designed for use in all of these applications.
RISK FACTORS
An investment in the Company involves a high degree of risk. In
addition to the other information set forth in this Prospectus,
prospective investors should carefully consider the following risk factors
when evaluating an investment in the Company.
PRODUCT OBSOLESCENCE. The industry in which the Company competes,
and the technologies for which the Company's products are designed, are
subject to rapid technological changes. These rapid changes may result in
product obsolescence or declining prices. Accordingly, the ability of the
Company to remain competitive will depend in a large part upon its ability
to innovate and generally keep abreast of technological changes, of which
there can be no assurance.
COMPETITION. The Company faces competition in the sale of virtually
all of its products, including competition from major corporations with
greater financial, technical, marketing and other resources than the
Company. There can be no assurance that the Company will be able to
remain competitive in the future.
DEFENSE INDUSTRY DOWNSIZING: HISTORICAL DEPENDENCE ON GOVERNMENT
CONTRACTS. World events have resulted in a decreased demand for defense-
related products and a general downsizing of the American defense
industry. This factor, along with federal budget constraints, is likely
to have an adverse impact on the Company's ability to continue to attract
and retain orders from defense contractors which, as a group, still
account for a significant portion of the Company's business. While the
Company has mitigated this risk by the addition of commercial business,
there is no assurance that it will always to be able to do so.
DEPENDENCE ON SUPPLIERS. The success of the business of the Company
may depend in part upon the reliability of the Company's suppliers of
subcomponents and raw materials. The Company is subject to the risks of
shortages and delays in delivery of subcomponents and such materials.
There can be no assurance that the Company will continue to be able to
locate reliable secondary sources of these subcomponents and materials.
DEPENDENCE ON KEY MANAGEMENT AND EMPLOYEES. The Company is highly
dependent upon the efforts of its management for its success. The loss of
the services of one or more of its key officers, particularly Joseph H.
Kiser, Chairman of the Board and Chief Scientific Officer and David G.
Sherman, President and Chief Executive Officer, could have a material
adverse effect on the Company's business. The Company maintains "key man"
life insurance on the lives of Messrs. Kiser and Sherman, each of whom has
an employment agreement with the Company. The success of the Company also
depends upon the Company's ability to attract and retain other qualified
personnel, particularly technical personnel for research and development,
of which there can be no assurance.
PRICE STABILITY. Competition provides constant downward pressure on
the prices of the components sold by the Company in the commercial
marketplace. The Company's sales to defense-related contractors and
manufacturers have historically occurred in a relatively stable price
environment. Moreover, political pressures on defense spending may
adversely affect prices and profit margins in that market comparable to
those already present in the commercial market. While the Company
believes that its ongoing expansion into high volume, low-cost production
capabilities will permit it to respond successfully to these price
pressures, there can be no assurance that it will do so.
LIMITED PATENT PROTECTION. The Company's success is dependent upon
its proprietary technology. Currently, only some of the Company's
products are protected by patents. The Company relies on confidentiality
and non-disclosure agreements and on trade secret laws to protect its
unpatented technology. There can be no assurance that the steps taken by
the Company in this regard will be adequate to deter misappropriation of
its proprietary technology or that the protection afforded by trade secret
laws will adequately protect the Company. Although the Company believes
that its products and technology do not infringe on any existing
proprietary rights of others, there can be no assurance that third parties
will not assert infringement claims in the future.
RELIANCE ON KEY CUSTOMERS. While the Company sold its products to
over 450 separate companies or divisions of companies in 1996, the Company
relies on certain key customers, defense programs, and commercial programs
throughout periods of the year. No single customer represented more than
11% of total sales in 1996. Nevertheless, the loss of certain key
customers could materially and adversely affect the Company.
POSSIBLE PRICE VOLATILITY. The market price of the Common Stock may
be significantly affected by factors such as announcements of new products
by the Company or its competitors, as well as variations in the Company's
results of operations and market conditions in the electronic components
industry in general. Market prices may also be affected by movements in
prices of securities in general. Although the Common Stock is traded on
the Nasdaq Stock Market, there is no assurance that it will remain
eligible to be included on Nasdaq.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
of Common Stock by the Selling Shareholders. The Selling Shareholders
have agreed to pay all commissions and other compensation to any
securities broker-dealers through whom they sell any of the Shares.
SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
Selling Shareholders and the Shares offered by the Selling Shareholders
pursuant to this Prospectus. None of the Selling Shareholders within the
past three years has had any material relationship with the Company or any
of its affiliates except as described below. The information as to
beneficial ownership is based upon statements furnished to the Company by
the Selling Shareholders or their agents.
<TABLE>
<CAPTION>
NO. OF NO. OF
NAME OF SHARES SHARES SHARES TO BE BENEFICIALLY
SELLING BENEFICIALLY BEING OWNED ON COMPLETION OF
SHAREHOLDER OWNED OFFERED THE OFFERING
Number % of Class
<S> <C> <C> <C> <C>
Millenco LP 345,000(1) 345,000(1) 0 0
Newark Sales 45,000(1) 45,000 (1) 0 0
Sales Link 180,000(1) 180,000(1) 0 0
Rita Folger 15,000(1) 15,000(1) 0 0
Carla Stewart 15,000(1) 15,000(1) 0 0
Mark Nordlicht 60,000(1) 60,000(1) 0 0
Broadway Partners 45,000(1) 45,000(1) 0 0
Robert Cohen 22,500(1) 22,500(1) 0 0
Ellen Cohen 7,500(1) 7,500 (1) 0 0
Lenore Katz 7,500(1) 7,500(1) 0 0
Jeff Rubin 7,500(1) 7,500(1) 0 0
Eugene L. Neidiger 8,418(2) 8,418(2) 0 0
Charles C. Bruner 22,218(3) 8,418(2) 13,800 *
J. Henry Morgan 6,450(3) 3,450(2) 3,000 *
Robert L. Parrish 19,232(3) 3,538(2) 15,694 *
Anthony B. Petrelli 10,856(3) 8,418(2) 2,438 *
John J. Turk, Jr. 2,442(3) 942(2) 1,500 *
Regina L. Neidiger 2,656(2) 2,656(2) 0 0
George L. McCaffrey 4,580(2) 4,580(2) 0 0
Michael P. McCaffrey 4,580(2) 4,580(2) 0 0
</TABLE>
* Less than one percent
(1) Consists of Shares issuable upon exercise of Warrants purchased from
the Company pursuant to the Securities Purchase Agreement (as defined
below).
(2) Consists of Shares issuable upon exercise of Agent's Warrants (as
defined below) paid to NTB as part of its compensation for acting as
placement agent for the private offering and subsequently assigned by
NTB to the individuals named.
(3) Includes Shares issuable upon exercise of Agent's Warrants (as
defined below) paid to NTB as part of its compensation for acting as
placement agent for the private offering and subsequently assigned by
NTB to the individuals named.
- --------------------------------
Neidiger, Tucker, Bruner, Inc. ("NTB"), a registered broker-dealer,
acted as the Company's underwriter in its initial public offering in 1994
and recently acted as Selling Agent in a private offering of securities of
the Company which is described below. Prior to the private offering and
other than NTB, the Company has had no relationship with the Selling
Shareholders.
On March 4, 1997, Millenco LP, Newark Sales, Sales Link, Rita Folger,
Carla Stewart, Ace Foundation, Jules Nordlicht, Mark Nordlicht, Broadway
Partners, Robert Cohen, Ellen Cohen, Lenore Katz and Jeff Rubin
(collectively, the "Purchasers") entered into a Securities Purchase
Agreement (the "Securities Purchase Agreement") with the Company which
provided for the sale by the Company to the Purchasers of up to $7,500,000
in subordinated debentures convertible into shares of Common Stock (the
"Debentures") and 750,000 warrants to purchase shares of the Common Stock
(the "Warrants"). For the initial purchase, $5,000,000 of Debentures and
500,000 warrants were sold. The Purchasers had the option for a period of
150 days from the date of the Agreement to purchase up to an additional
50% of the amount of their original purchases of Debentures and Warrants
(the "Options"). For the last 30 days of the 150 day period, NTB could
sell the Debentures and Warrants underlying any unexercised portion of the
Options to third parties. Subject to the restrictions discussed below,
the Debentures were convertible into Common Stock at the option of the
holder at the lower of (i) $9.50 per share, or (ii) 84% of the average
closing bid price on Nasdaq for the ten trading days prior to the date
that the Company receives a notice of conversion. Debentures bore
interest at the rate of 7% per annum until the first to occur of four
years from the date of issuance or conversion. If the conversion price of
a Debenture for which conversion was requested was $8 per share or less on
the applicable conversion date, the Company had the option to decline to
convert the Debenture and instead redeem the Debenture by payment of 116%
of the principal amount plus accrued interest. Repayment of the principal
and interest of the Debentures was subordinated to the Company's secured
debt in favor of banks, savings and loan associations, institutions or
other asset-based lenders, in an amount up to $25,000,000, irrespective of
whether such debt was currently owed or was incurred in the future. Upon
exercise of their Options, all of the remaining $2,500,000 of Debentures
and 250,000 Warrants were sold to the Purchasers. Subject to the
restrictions described below, Warrants may be exercised by the holders for
three years at an exercise price of $9.50. Warrants may not be redeemed
by the Company.
Under the Securities Purchase Agreement, the Purchasers were entitled
to demand registration of the Common Stock issuable upon conversion of the
Debentures and exercise of the Warrants under the Securities Purchase
Agreement and have exercised their rights for the Shares being registered
herein. The Company sought and received shareholder approval at the 1997
annual meeting of the Company's shareholders held on June 20, 1997. Until
shareholder approval of the Securities Purchase Agreement and the
transactions thereunder was obtained (i) the Debentures were convertible
into a maximum aggregate of 765,367 shares of Common Stock on a first-
converted basis, and (ii) the Warrants were not exercisable.
For acting as the Selling Agent for the placement of the Debentures
and the Warrants pursuant to the Securities Purchase Agreement, NTB
received a commission of 5% of the amount sold in the offering and 45,000
Agent's Warrants as additional compensation. The Agent's Warrants have
the same terms as the Warrants except that (i) the exercise price is the
same as the conversion price of the Debentures (rather than the exercise
price of the Warrants), (ii) the Agent's Warrants have a term of five
years (rather than the three-year term of the Warrants), and (iii) the
Agent's Warrants carry unlimited piggyback registration rights (rather
than the demand registration rights of the Warrants and the Debentures).
The Shares underlying the Agent's Warrants (including any additional
Agent's Warrants issuable upon exercise of Options) are being registered
hereunder pursuant to the exercise of such piggyback registration rights.
PLAN OF DISTRIBUTION
All of the Shares offered hereby are being sold by the Selling
Shareholders. The Shares will be offered by the Selling Shareholders from
time to time at market prices prevailing on the Nasdaq National Market
System at the time of offer and sale, at prices related to such prevailing
market prices, in negotiated transactions, or in a combination of such
methods of sale. The Selling Shareholders may effect such transactions by
offering and selling the Shares directly to or through securities broker-
dealers, and such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Shareholders
and/or the purchasers of the Shares for whom such broker-dealers may act
as agent or to whom the Selling Shareholders may sell as principal, or
both (which compensation as to a particular broker-dealer might be in
excess of customary commissions).
The Selling Shareholders and any broker-dealers who act in connection
with the sale of the Shares hereunder may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act of 1933 (the
"Securities Act") and any commissions received by them and profit on any
resale of the Shares as principal might be deemed to be underwriting
discounts and commissions under the Securities Act. The Company has
agreed to indemnify the Selling Shareholders against certain liabilities,
including liabilities under the Securities Act as underwriters or
otherwise.
Under applicable rules and regulations under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") any person engaged
in a distribution of any of the Shares may not simultaneously engage in
market activities with respect to the Common Stock for the applicable
period under Regulation M prior to the commencement of such distribution.
In addition and without limiting the foregoing, the Selling Shareholders
will be subject to applicable provisions of the Exchange Act and the rules
and regulations thereunder, including without limitation Rules 10b-5 and
Regulation M, which provisions may limit the timing of purchases and sales
of any of the Shares by the Selling Shareholders. All of the foregoing
may affect the marketability of the Common Stock.
The executive officers, Directors and certain large shareholders of
the Company are "affiliates" of the Company which subject them to the
limitations of Rule 144, promulgated under the Securities Act ("Rule
144"). In general, under Rule 144 as currently in effect, an "affiliate"
of the Company or a person who has beneficially owned shares which are
"restricted securities" as defined in Rule 144 for at least one year, is
entitled to sell within any three-month period a number of shares that
does not exceed the greater of: (i) one percent (1%) of the then
outstanding shares of Common Stock of the Company, or (ii) the average
weekly trading volume of the Common Stock during the four calendar weeks
preceding a sale by such person. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. Under Rule
144, however, a person who is not, and for the three months prior to the
sale of such shares has not been, an affiliate of the Company is free to
sell shares which are not "restricted securities," or "restricted
securities" which have been held for at least two years, without regard to
the limitations contained in Rule 144.
Under Section 16 of the Securities Exchange Act of 1934, any
executive officer, Directors, and 10% or greater shareholders of the
Company will be liable to the Company for any profit realized from any
purchase and sale (or any sale and purchase) of Common Stock within a
period of less than six months.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the shares of Common Stock is
American Securities Transfer & Trust, Inc., 1825 Lawrence Street, #444,
Denver, Colorado, 80202.
LEGAL MATTERS
The validity of the securities to be offered hereby will be passed
upon for the Company by Gorsuch Kirgis L.L.C., Denver, Colorado, counsel
for the Company.
EXPERTS
The financial statements of Vari-L Company, Inc. as of December 31,
1996 and 1995 and for the years then ended have been incorporated by
reference herein and in the registration statement in reliance upon the
report of Haugen, Springer & Co., independent certified public
accountants, incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing.
INDEMNIFICATION OF DIRECTORS
The Securities Purchase Agreement provides that the Company and its
officers, Directors, and controlling shareholders are indemnified against
losses arising out of any untrue statement of a material fact or any
omission to state a material fact necessary to make the statements in the
registration statement or prospectus, in light of the circumstances under
which they were made, not misleading, to the extent that such untrue
statement or omission is contained in any information or affidavit a
Selling Shareholder furnished to the Company.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers
and controlling persons of the small business issuer pursuant to the
foregoing provisions, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
